Governor declares financial emergency in Detroit

Friday

Mar 1, 2013 at 3:32 PMMar 1, 2013 at 3:35 PM

Barring rapid improvements to Detroit's weakening financial condition or a miraculous nosedive-reversing plan from the city's elected leaders, Michigan Gov. Rick Snyder will appoint an emergency manager to oversee a city once renowned for its manufacturing might.

AP

Barring rapid improvements to Detroit's weakening financial condition or a miraculous nosedive-reversing plan from the city's elected leaders, Michigan Gov. Rick Snyder will appoint an emergency manager to oversee a city once renowned for its manufacturing might.

Snyder declared Detroit was in a financial emergency on Friday and appears all but ready to name an emergency manager pending an appeal from Mayor Dave Bing, saying he has a top candidate picked out for the job.

Detroit would be become the largest city in the United States to have state control over its finances.

"In many respects I describe today as both a sad day ... saying there's a financial emergency in Detroit, but also a day of optimism and promise because it's time to start moving forward and solving these problems," Snyder told The Associated Press on Friday ahead of a community forum at Wayne State University.

Detroit has a $327 million budget deficit and faces more than $14 billion in long-term debt. It has been making ends meet on a month-to-month basis with the help of bond money held in a state escrow account and has instituted mandatory unpaid days off for many city workers.

Those troubles, along with underfunded yet crucial city services, such as police and fire departments, and the absence of legitimate turnaround plans from Bing and the City Council forced Snyder's hand, he said.

"Citizens are not getting the services they deserve and need," Snyder said. "Public safety, lighting, transportation — all those areas need help and it's time to call all hands on deck and say let's all work together."

A March 12 hearing with Bing and the city has been scheduled following the 10-day appeal process. A spokesman for Bing said the mayor would release a statement later Friday.

The mayor said Thursday he has thought since taking office in 2009 that some kind of outside help is needed.

"I'm more interested, instead of fighting Lansing, in working with them," the first-term mayor said.

Snyder described the person he has in mind to become the emergency manager as an "outstanding" candidate with "strong financial" and "strong legal knowledge." Snyder declined Friday to release any other details.

Emergency managers have the power under state law to develop financial plans, renegotiate labor contracts, revise and approve budgets to help control spending, sell off city assets not restricted by charter and suspend the salaries of elected officials.

"The role here is to be that supportive partner and to work on projects where we could really make a difference," Snyder said, adding there is no "big bailout coming" from the state.

Detroit would be the largest city in the United States to come under state oversight, according to James Hohman, assistant director of Fiscal Policy at the Mackinac Center for Public Policy, a free-market think tank based in Midland, Mich.

And in Michigan, Detroit would be the sixth city to come under state oversight. Pontiac, Flint, Ecorse, Allen Park and Benton Harbor already have managers, as do public school districts in Detroit, Highland Park and Muskegon Heights.

A review team first looked into Detroit's books in December 2011, but stopped short of declaring a financial emergency. A second team began to pore over the city's finances again this past December and gave Snyder a report on Feb. 19 that said the city's accumulated deficit as of June 30, 2012, would have topped $900 million if leaders in previous years had not issued bonds.

The review team also said that because of Detroit's cash deficit, the city would have had to either increase revenues or decrease expenditures — or both — by about $15 million per month for three months starting in January to "remain financially viable."

A brochure produced by the state and distributed Friday says, "Additional actions are needed to continue the reinvention of Detroit."

"An emergency financial manager can more quickly and efficiently reform the finances in the city and stop the cycle of overspending and one-time fixes. Solving the structural problems will create a strong financial foundation that will allow Detroit to survive," it reads.

Snyder's declaration is the latest in a string of negatives wound tightly around Detroit's neck in recent years.

Explicit text messages made public in 2008 and revealing the tawdry affairs and other shenanigans by the city's then-Mayor Kwame Kilpatrick led to criminal charges, jail and eventually prison time for him.

The 2010 U.S. Census revealed that Detroit — which at one time was the symbol of American progress and held great political power thanks to the auto industry — had lost a quarter-million people over the previous decade.

An undermanned and underpaid police force sometimes appears overwhelmed by the city's high violent crime rate, and the number of murders also is on the rise.

Snyder said he expects an emergency manager to get to work immediately once appointed.

"It took 50 or 60 years to get in this situation, so it doesn't turnaround overnight," Snyder told the AP. "I would hope there are more low-hanging fruit things that can be done fairly quickly to start showing there's a difference going on."